39. Where a person of the same name as the payee or indorsee § 139 of a bill payable to order, presents it at maturity to the acceptor, who pays it, he remains liable to the real owner: Graves v. American Bank, 17 N. Y. 205 (1858).

Compensation or Set-off.-Compensation in Quebec differs from set-off in the other provinces in this, that when two persons are mutually debtor and creditor, compensation takes place by the sole operation of the law. The moment two debts, equally liquidated and demandable, exist simultaneously, they are mutually extinguished in so far as they correspond: C. C. Arts. 1187, 1188. The result is that in Quebec, a bill transferred after maturity would be subject to any money claim which the acceptor might have against any prior holder at or after maturity. In the other provinces a claim arising out of some matter not connected with the bill, and which a party liable on it might set up against the holder, could not be set up against a person to whom such holder might transfer it bona fide, even after maturity. In the old phraseology it is not an equity attaching to the bill, or in the language of the Act, a defect of title. The repeal of Art. 2287 of the Code, which went farther than the law of England in this respect, and the enactment of section 8 of the amending Act of 1891 (sec. 10 of this Act) will tend to assimilate the law in Quebec to that of the other provinces and of England in this matter.

ILLUSTRATIONS.

1. Attorney holding for collection the note of a local judge arranged to apply on the note fees payable to the maker. Certain fees were indorsed on the note and enough more were earned to pay it, but the attorney refused to credit or apply them. He afterwards absconded. It was held that the note was only discharged in part: Ketchum v. Powell, 3 U. C. O. S. 157 (1833).

2. Set-of by indorsees against the holder is no defence on a note given for the accommodation of the indorser. The indorsee of an overdue bill or note is liable to such equities only as attach to the bill or note itself, and to nothing collateral due from the indorser to the maker, or indorsee to payee: Wood v. Ross, 8 U. C. C. P. 299 (1858); Smith v. Nicholson, 19 U. C. Q. B. 27 (1859).

3. A note transferred after maturity is subject in Quebec to a money claim against any holder at or after maturity: Gibsone v. Lee, 1 Rev. de Lég. 347 (1814); Hays v. David, 3 L. C. R. 112 (1852); Duguay v. Senecal, 1 L. C. L. J. 26 (1865); Amazon Ins. Co. v. Quebec & G. P. S. S. Co., 2 Q. L. R. 310 (1876).

§ 139

Discharge by compensation.

4. The indorser may set up in compensation any money due or paid to the maker by the holder since its maturity: Quebec Bank v. Molson, 1 L. C. R. 116, (1851).

5. An account for goods sold and delivered may be set up in compensation of a promissory note: Angers v. Ermatinger, 2 L. C. L. J. 158 (1866); Quintal v. Aubin, M. L. R. 1 S. C. 397 (1883).

6. Compensation not allowed against a bill or note because claim not equally "claire et liquide": Ryan v. Hunt, 10 L. C. R. 474 (1860). Parsons v. Graham, 15 L. C. J. 41 (1870); Perrault v. Herdman, 3 R. L. 440 (1871).

7. Claims arising after the insolvency of a company, or a judicial abandonment, cannot be set up in compensation against the liquidator or curator: Exchange Bank v. City & District Savings Bank, 14 R. L. 8 (1885); Exchange Bank v. Canadian Bank of Commerce, M. L. R. 2 Q. B. 476 (1886); Riddell v. Goold, ibid. 5 S. C. 170 (1889).

8. The maker of a note may set up in compensation against the holder the amount of a note of a third party which he gave him as collateral, and which the latter has disposed of: Lepage v. Hamel, 19 R. L. 439 (1884).

9. The indorsee of an overdue promissory note is liable, in an action against the maker, to all equities arising out of the note transaction itself, but not to a set-off in respect of a debt due from the indorser to the maker, arising out of collateral matters: Burrough v. Moss, 10 B. & C. 558 (1830).

10. As to exchange of bills under a settlement at the clearing house, see Warwick v. Rogers, 5 M. & G. 340 (1843); Banque Nationale v. Merchants' Bank, M. L. R. 7 S. C. 336 (1891).

Prescription or the Statute of Limitations. This is another subject as to which the law of Quebec differs from that of the other provinces, not only as to the length of time necessary to acquire the right, but also as to its nature, as to whether it merely bars the remedy on a bill or extinguishes the right of action.

In Quebec the time required is five years, reckoning from maturity: C. C. Art. 2260 (4). The debt is then absolutely extinguished, and no action can be maintained after the delay for prescription has expired: C. C. Art. 2267. This was also the law before the Code: Coté v. Morrison, 2 L. C. J. 206 (1858); Lavoie v. Crevier, 9 L. C. R. 418 (1859); Bardy v. Huot, 11 L. C. R. 200 (1861); Giard v. Giard, 15 L. C. R. 494 (1865); Bowker v. Fenn, 10 L. C. J. 120 (1865); Giard v. Lamoureux, 16 L. C. R. 201 (1865).

Where a loan is made by one non-trader to another, and § 139 a note given for the amount at the time, the note constitutes By prethe contract, and the debt is prescribed in five years: Vachon v. Poulin, Q. R. 7 Q. B. 60 (1898).

The Code also contains the following provisions regarding the interruption of prescription:-No indorsement on a note or bill made by a person receiving payment will take it out of the operation of the law: Art. 1229. Where the amount exceeds $50, no promise or acknowledgment is sufficient, unless in writing and signed by the party making the promise: Art. 1235. Prescription cannot be renounced by anticipation, but time acquired may be renounced: Art. 2184. Renunciation by any person does not prejudice his co-debtors, his sureties, or third parties: Art. 2229.

Prescription runs against absentees: Art. 2232-also against married women, minors, idiots, madmen and insane persons, saving their recourse against those who legally represent them: Arts. 2234, 2269. It does not run with respect to debts depending on a condition until the condition happens; or debts with a term until the term has expired: Art. 2236. Any one or more of the following prescriptions may be invoked in Quebec:-(1) Any prescription entirely acquired under foreign law, on a bill payable outside of Quebec, in favor of a person living abroad. (2) Any prescription entirely acquired in Quebec, reckoning from maturity, on a bill payable there, when the party was domiciled there at maturity, in other cases from the time he became domiciled there. (3) Any prescription resulting from the lapse of successive periods in the preceding cases, when the first period elapsed under the foreign law: Art. 2190. As to a conflict of these laws, see section 160 and notes thereon. The Code contains no express provisions as to evidence regarding bills and notes, therefore, in an action on a note made before the Act of 1890, by Arts. 2240 and 2241 recourse must be had to the law of England in force on the 30th of May, 1849. Under this proof may be made by parol of a payment on account, and this is sufficient to interrupt prescription. Art 1235 does not apply to proof of such payment: Boulet v. Metayer, Q. R. 23 S. C. 289 (1902).

scription.

$ 139

Statute of Limitations.

When it

begins

to run.

In the other provinces the time required is six years. The English Statutes, 21 James I. c. 16, and 3 & 4 Anne c. 8, establishing this limitation as to bills and notes, were introduced into the other provinces at the various dates set out ante p. 17; but were never law in Lower Canada: Butler v. Macdougall, 2 Rev. de Lég. 70 (1835); Russell v. Fisher, 4 L. C. R. 237 (1854); Langlois v. Johnston, ibid. 357 (1854). There has also been provincial legislation fixing this time in Nova Scotia and New Brunswick: R. S. N. S. c. 167; C. S. N. B. c. 85. Under these Acts a promise or acknowledgment must be in writing and signed by the party chargeable, to take a case out of the statute. Payment may have such effect, but an endorsement on a bill or note by the party receiving or his agent, is not sufficient. No person is liable on account of the act or promise of his co-contractor or debtor, and one may be liable and may be sued without the other. Action by or against minors, married women, or insane persons, may be brought within six years from the removal of the disability. In New Brunswick, absentees are placed on the same footing; in Nova Scotia the provision applies only to actions to be brought against them. In Ontario there are two Acts-R. S. O. c. 72, relating to the Limitation of Actions, and c. 146, to Written Promises. The former allows minors and persons non compos mentis six years after the removal of the impediment to bring an action; allows the same time after his return to the province, to sue an absentee; and provides that time shall run in favor of a joint debtor, although one or more joint debtors may be out of the province. Chapter 146 provides that a promise to take a case out of the statute must be in writing and signed by the party chargeable; that in case of joint contractors, or executors or administrators of any contractor, a promise or payment by one shall not bind the others; that no indorsement on a bill or note by the party receiving payment shall be sufficient; and that a ratification after majority, of a contract during infancy, must be in writing.

Ordinarily the statute begins to run when a bill matures. or is dishonored. Prescription begins to run on the day following the last day of grace; Dupuis v. Hudon, Q. R. 12 S. C. 227 (1897). If it is payable on demand, it has been held in Quebec, that prescription runs from its date or its

of Limita

issue (illustration No. 17 post); and this was considered to § 139 have been the case in England: Byles, p. 359; Norton v. Ellam, 2 M. & W. 461 (1837). It has, however, been consid- By Statute ered latterly that bills payable on or after demand, or at sight, tions. or a fixed period after sight, should be on the same footing as other bills, and the statute should only run from their dishonor or maturity. See Re Boyse, 33 Ch. D. 612 (1886); R. Bethell, 34 Ch. D. 561 (1887); Sparham v. Carley, 8 Man. 246 (1892). But see the following cases where it was held that the statute runs from the date of a demand note: Brown v. Brown, [1893] 2 Ch. at p. 394; Edwards v. Walters, [1896] 2 Ch. at p. 162; Boulton v. Langmuir, 24 Ont. A. R. at p. 622 (1897).

See section 134 (b), where interest, as damages on a dishonored hill, runs from the time of presentment for payment, if the bill is payable on demand, and from the maturity of the bill in any other case. The principle there involved is somewhat analogous to that in the present question.

Chalmers (p. 293) lays down the following five rules as Law of embodying the law of England on the subject:

1. Subject to the case provided for by section 48 (1), and rule 5, no action on a bill can be maintained against any party thereto after the expiration of six years from the time when a cause of action first accrued to the then holder against such party.

2. As regards the acceptor, time begins to run from the maturity of the bill, unless

(1) Presentment for payment is necessary in order to charge the acceptor, in which case time (probably) runs from the date of such presentment; or

(2) The bill is accepted after its maturity, in which case time (probably) runs from the date of acceptance.

3. As regards the drawer or an indorser, time (generally) begins to run from date when notice of dishonor is received.

4. When an action is brought against a party to a bill to enforce an obligation collateral to the bill, though arising out of the bill transaction, the nature of the particular transaction determines the period from which the time begins to run.

5. Any circumstance which postpones or defeats the operation of the Statute of Limitations in the case of an ordinary contract postpones or defeats it in like manner in the case of a bill. No indorsement or memorandum of any payment written or made upon a bill by or on behalf of the party to whom such payment is made, is sufficient to defeat the operation of the statute.

England.